Preexisting Conditions & Wellness Incentives: A Horse of a Different Color?
Filed under: Chronic Conditions, Health Benefit Costs, Proposed Legislation
Vincent van Gogh (1899)
The Washington Post has an interesting article which covers an aspect of pending health reform legislation that hasn’t received much attention as of late: wellness incentives tied to premium rates. As I have noted on this blog before, Senators Harkin and Baucus were both as of late said to have been considering legislative provisions which would enable employers to both reward and punish employees who fail to meet certain health goals. In pending legislation (and its practical application) it would seem the line between reward and punish has begun to blur.
The WaPo article relates how provisions passed by the Senate finance and health committees could more than double the allowable insurance premium increases tied to various conditions–or more precisely, to employee medical evaluations which fail to meet proscribed guidelines regarding weight, glucose and cholesterol levels, and other biometrics in addition to smoking cessation.
The Washington Post reports
Critics say employers could use the rewards and penalties to drive some workers out of their health plans.
President Obama and members of Congress have said they are trying to create a system in which no one can be denied coverage or charged higher premiums based on their health status. The insurance lobby has said it shares that goal. However, so-called wellness incentives could introduce a colossal loophole. In effect, they would permit insurers and employers to make coverage less affordable for people exhibiting risk factors for problems such as diabetes, heart disease and stroke.
“Everybody said that we’re going to be ending discrimination based on preexisting conditions. But this is, in effect, discrimination again based on preexisting conditions,” said Ann Kempski of the Service Employees International Union.
At present, wellness incentives may be utilized, but such incentives are limited to 20%. The Washington Post reports
Under current regulation, incentives based on health factors can be no larger than 20 percent of the premium paid by employer and employee combined. The legislation passed by the health and finance committees would increase the limit to 30 percent, and it would give government officials the power to raise it to 50 percent.
A single employee whose annual premiums cost him and his employer the national average of $4,824 could have as much as $2,412 on the line. At least under the health panel’s bill, the stakes could be higher for people with family coverage. Families with premiums of $13,375 — the combined average for employer-sponsored coverage, according to a recent survey — could have $6,688 at risk.
It may be useful to remember that an individual insurance mandate seems a likely outcome of any legislation passed. Similar wellness incentive allowances have been included for health insurers in the individual market as well. It may also be useful to consider how, in practice, “incentives” have been utilized by employers in the marketplace. By engaging in a two-step process, an employer may rather easily render a “wellness incentive” into a preexisting condition premium.
The Washington Post reports that
Valeo, an auto parts supplier, four years ago raised the deductible on an employee health plan to $2,200 from $200 for individual coverage and to $4,400 from $400 for family coverage. Then it gave employees the opportunity to reduce the deductible to its starting point by not smoking and by meeting goals for blood pressure, cholesterol and body mass index, said Robert Wade, Valeo’s director of human resources for North America.
“If they don’t comply, they end up being penalized, if you will, but we refer to it as a Healthy Rewards program,” Wade said.
I would suggest that the difference between “a healthy reward” and a preexisting condition punishment seems rather malleable.
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The argument that wellness incentives are a “wolf in sheep’s clothing” to pass along premium increases for pre-existing conditions assumes that the health plan, government, or employer doesn’t want the covered individual to meet the wellness targets. The corporate wellness programs surveyed in the Washington Post article, however, set fairly low bars for employees to meet. This seems to indicate that incentives will drive the health plan, government, employer, or to choose wellness targets that are achievable.
The rhetorical move from “pre-existing condition” to “wellness incentive” ties to personal responsibility and the possibility for future improvement. Certainly there will be some people who try very hard and cannot hit the wellness outcomes required for the premium discount, but they are likely in the minority. In many cases the behavior of the majority would probably be positively impacted by the shift towards wellness incentives in plan design.
While employees harmed by wellness incentives are likely to be in the minority, they can still end up in a better position as a result of a wellness program. A number of options exist for a Pareto optimal outcome, where the gains from a change to the system can be used to compensate those harmed in the system. Failure to achieve the wellness target, for example, could function like a health risk assessment to trigger more coordination of care through a disease management program. If the health plan were designed so that some of the savings from the healthy behaviors were used to pay for disease management for the less healthy, everyone would be better off. I don’t see this in current versions of the legislation, but we are working diligently to get it inserted.